Lundbeck Earnings: Demand for Strategic Brands Helps Offset Generic Erosion of Mature Portfolio

Lundbeck HLUN B reported second-quarter results highlighted by revenue of DKK 4.9 billion, representing a 10% increase from the prior-year period. Continued strong performance from Lundbeck’s strategic brands (Trintellix, Abilify Maintena, Rexulti, and Vyepti) accounted for nearly DKK 3.4 billion of sales, representing growth of 14%. We maintain our fair value estimate of DKK 42.50 per share, and we view shares as undervalued, currently trading about 17% below our fair value estimate.

Lundbeck’s no-moat rating is based on generic competition continuing to erode its legacy drugs, and patent losses having an impact on its portfolio over the next 10 years. Lundbeck’s High Uncertainty Rating is due to the elevated rate of failure associated with central nervous system drug development, upcoming patent losses, and pricing pressure from generic entry.

We forecast total revenue of nearly DKK 20 billion in 2023, representing growth of about 9%. We still expect solid demand from Trintellix, Abilify Maintena, and Rexulti to drive growth and help to offset generic erosion of Lundbeck’s mature portfolio over the next few years.

We forecast migraine prevention drug Vyepti to achieve steady growth throughout our forecast period. Vyepti launched in the United States in April 2020, and its volume market share has grown to 7% at the end of the second quarter of 2023. It has been approved in 45 markets globally, and we forecast Vyepti could account for nearly 20% of total company sales by 2032. Management continues its global commercial rollout of Vyepti with launches in nine additional countries in the second half of 2023. We anticipate Lundbeck to be able to use profits from Vyepti and its other strategic brands to further develop its largely early-stage portfolio over the next 10 years.